Performance Evaluation of Crops Insurance on the Farmers' Motivation in Hamadan Province, Iran

Crops insurance is one of the strategies for coping with risks in agricultural activities and to reduce the farmers' income fluctuations. The aim of this study is to evaluate the financial performance of agricultural insurance and the factors motivating farmers to insure crops in Hamadan province, Iran. The required data has been collected from 165 farmers through face to face interview by using random sampling and by analyzing the annual performance reports of Agricultural Insurance Fund (AIF) for 2003-2010. Path diagram model, regression analysis and financial appraisal technique have been used to assessing the performance of Agricultural Insurance Fund. The results of objective assessment show that crop insurance coverage has many variations and the farmers have weak tendency for taking out the horticulture insurance. Analyzing the farmer's share of the premium paid for the different products show no clear pattern of the governmental funds for supporting farmers. Furthermore, on the indemnity payment, AIF is dependent on governmental subsides, on average pays 4 Rials indemnity per 1 Rials premium. Evaluation of the AIF's portfolio with respect to government's share of the premium shows the profitability of irrigated wheat, irrigated barely, canola, grapes, apricot and almond and no profitability of any crops with no government aids. On the other hand, the findings of subjective evaluation show that there is significant difference between the motivation of the insured and uninsured farmers. Furthermore, in the insured groups, the results indicate the relationship between the farmers' willingness to insure crops and their awareness, financial situation, area of cultivation and crops production. Moreover, the performance of Agricultural Insurance Fund has been different between counties and irrigated crops insurance has better performance in comparison to rainfed crops.